Cutting through the complexities of Employment Misclassification

The technology business in the US is huge, with some 4.4 million employees in 2014, and this figure is expected to grow by up to half a million by the year 2024. Not surprisingly, Computer Futures has a large and growing presence in theUS. However, there are wide variations in the way people work and in the way their work is managed in the US compared to other parts of the world.

While traditional IT industries such as software, hardware and system integration are still big employers, the growing use of IT by ‘conventional’ companies is creating talent shortages among the individuals with the skills needed to implement software and platform products on to existing company processes. Firms are rapidly adopting enterprise resource planning (ERP) and customer relations management (CRM) technology and there is a growth in uptake of content management and e-commerce systems. Of course, with all this extra information flowing around there is also a growing need for information security specialists. The scarcity of these skills inevitably influences salary scales which are high in these areas – and likely to remain so.

Compliance in the contractor market

There are other features of the US market which employers need to take into account. In the US, the contract market makes up a growing slice of the ICT recruitment cake – between 7 and 25 per cent according to business type, and who you ask. However, despite the United States’ reputation for a freewheeling, business-friendly environment, this market is very tightly regulated and rules vary between states.

Misclassification of independent contractors or failure to comply with strict wage and hourly laws can lead to problems. Morgan Kavanagh, EVP of the East Coast and Mid West offices observes, “In the ‘war for talent’, those who want to leverage independent contractors face a minefield of compliance and regulatory problems. It is our job to help them operate in a compliant fashion.”

A lack of understanding of this landscape can lead to hefty Department of Labor penalties or the risk of litigation. So, in addition to matching the right candidate to the right position, Computer Futures sees a big part of its role as ‘contingent workforce management’: guiding and helping clients to meet legal and regulatory requirements. Kavanagh adds, “It’s a very complex landscape, one where interpretation and enforcement are evolving and so a large part of the service we provide is in ensuring our services are offered in a compliant way”.

Relocation campaigns create new tech hubs across the US

Government intervention has had other effects on the ICT industry. Many states now offer incentives for tech businesses to re-locate to areas where traditional industry is in decline; cities like Pittsburgh, for example, where fiscal incentives and the attractions of Carnegie Mellon University have created a new tech hub. A similar combination can be found in many new tech hubs across America.

Employees themselves are also influencing where business is developing, in many cases actively seeking out places with lower living costs and the attractive, ‘cool’ ambience found in places like Austin, Texas. Scott Fulton, EVP of the West and Gulf Coast offices notes that, “You are seeing wage competition but you are also seeing companies move their IT to different parts of America. San Francisco and Silicon Valley are still major hubs for IT but more and more you are seeing companies move to places like Austin, (home of Dell), Denver, Dallas and Portland where the cost of living, and so the cost of labor, is cheaper.”

What does the future look like for jobs in tech?

Looking ahead, Computer Futures foresees the majority of its work is likely to remain in the contract market. Established recruiting companies often have internal recruitment teams for permanent staff but use agencies to deal with contract or temporary posts to provide flexibility. In addition, Computer Futures will remain focused on the high-value, specialist skillsets which in-house teams find harder to fill. And they are not afraid of social media taking their business. Fulton observes that, “The best consultants become integrated into their market place – they head up user-groups, do networking events and produce content that is interesting to the people working in their specialist areas; which is how they build their own personal brand within the market they work”.